Ford Used to Have Assembly and Production Plants in the Philippines. What Happened?
Ford isn’t just one of the biggest automobile manufacturers in the world, it’s also one of the oldest and arguably one of the most influential.
The American carmaker sold a total of 24,710 units in the country in 2022, an increase of 22 percent from the previous year and good enough for third place in the ranking for bestselling car brands in the country last year.
Car guys would know that Ford has had a long and proud history in the Philippines, and, for a time, even operated several production and assembly facilities right here. But why exactly are there no more Ford plants in the country?
History of Ford in the Philippines
Before we tackle Ford’s exit from the Philippines, we first need to know about its entry. Ford, of course, is known for helping revolutionize the car industry after its founder, Henry Ford, introduced the moving assembly line for the mass production of automobiles in 1913. Just five years later, in 1918, Ford entered the Philippine market through the Ford Motor Company of the Philippines, Inc. (FMCP), which operated as an importer and distributor of Ford vehicles.
By May 1968, Ford had officially opened a local automotive assembly plant: measuring 182,000 square feet inside an 11-hectare piece of land in Muntinlupa. This plant assembled models such as the British Cortina, the German Taurus, and the U.S. Galaxie.
The plant was equipped with state-of-the-art equipment and technology “to meet the highest standards of vehicle quality required by Ford research and testing.”
“More eloquent than any testimonial, Ford Motor Company's optimism for the Philippine economy is manifested in its multimillion-peso investment in its latest subsidiary, Ford Philippines, Inc..” said Henry Ford II, chairman of the board of Ford Motor Company in a message to celebrate the opening. “The installation of the Ford insignia at our new assembly plant in Greater Manila is symbolic of our confidence in the continuing development of the country's economy. We are therefore grateful for this opportunity to contribute to Philippine progress and it is our earnest hope that Ford Philippines, Inc. will be received with the same good faith with which we have come to the Filipino people.”
Then-President Ferdinand Marcos also sent in a message, which was delivered by his Industry Undersecretary Cesar Virata. “The opening of the automotive assembly plant of Ford Philippines, Inc. here is one more demonstration of the increasing capabilities of Filipino craftsmen and technicians, a manifestation that bids well to buoy our hopes for the eventual industrialization of our country,” President Marcos said. “On the company's part, it is an expression of confidence in the economic stability of this country and in the future of the Republic. This investment adds substance and sinews to our resources, which we must continually replenish and invigorate in order that we may attain all our goals of development. My warmest congratulations to Ford Philippines, and I hope that its venture in this field will enjoy every success.”
Of the plant’s 450 employees, nearly 100 percent were Filipinos.
Ford Facility in Bataan
In the late 1960s, the administration of then-President Marcos was inspired by the success of Taiwan’s Kaohsiung Export Processing Zone in attracting foreign investments and generating employment for its citizens. And so the government formally established a Free Trade Zone in Mariveles, Bataan. The area was eventually renamed to the Bataan Export Processing Zone (EPZ) in 1972, and it commenced operations one year later, 1973.
What attracted companies to set up shop in the EPZ were the numerous incentives, both fiscal and non-fiscal. For instance, companies who were registered there were exempt from paying customs duties on raw materials, semi-processed inputs, and even capital equipment. They were essentially exempt from all regulations applying to imports, as well from paying all export taxes, among many other incentives.
One of the firms that opened in the EPZ was Ford, which, in 1973, broke ground on a body stamping plant at the cost of P257 million. The Washington Post, in an article dated August 1, 1978, noted that the timing of the Ford plant was “fortuitous” as it came just a year after President Marcos imposed Martial Law in the country and that he was under pressure to prove that his iron hand was bearing fruit in terms of large-scale business investments.
In fact, one other reason for Ford’s presence in the country then was the Marcos administration’s Progressive Car Manufacturing Program of the Philippines, an initiative which “sought to encourage the assembly of the vehicles in the country with the use of imported completely knocked down (CKD) kits.” At the time, General Motors was also in the midst of constructing a P137 million transmission plant in Muntinlupa, as was Delta Motors, which had just completed an engine block plant.
In 1981, the Ford Philippines stamping plant represented an investment of around $35 million and was the third largest investment in the EPZ. Body parts for the Ford Cortina and the Grenada were stamped in the facility. It's worth noting though that the stamping plant itself was officially listed as a Canadian investment, perhaps due to the fact that a subsidiary was named as the owner rather than the American parent company.
There is not much data on how the body stamping plant was performing financially in its early years; however, the Washington Post story said that the plant reported losing $17 million by 1977. Thankfully, a year later, by 1978, the plant reported a turnaround—profit of $1.1 million against sales of $10.2 million.
First shutdown and reopening
However, five years later, in 1983, Ford announced that it would shut down operations in the Philippines, ostensibly due to a combination of factors: including economic challenges and changes in the global automotive industry at the time. It probably didn’t help that the Philippines was undergoing major political instability, especially following the assassination of Marcos’ political foe, Benigno “Ninoy” Aquino Jr. in August 21 that year.
Despite the closure of the production facility, Ford vehicles continued to be sold in the country through its network of dealers and distributors. However, in April 1998, Ford announced that it was resuming manufacturing operations in the Philippines with a $100 million investment on a new assembly plant in Sta. Rosa, Laguna. The company said then that it was “encouraged” by the economic and political stability of the country under then-President Fidel V. Ramos.
The plant, which opened about a year later in 1999, was planned to produce models such as the Ford Ranger pickup truck, the Laser, and the Econovan commercial truck. Several component supplier plants were also planning to join Ford in the Laguna Automotive Technology Park.
“Under the leadership of President Ramos, the Philippines has exhibited the political and economic stability that gives us the confidence to make this investment,” the Associated Press quoted Wayne Booker, Ford’s then-vice chairman, as saying in a statement.
The AP report also said the Philippine government granted Ford special incentives to woo the company to open the assembly and parts manufacturing plant in the country, including a special five percent gross annual income tax rate, which was less than the combined total of national and local taxes that companies outside of special zones have to pay, an exemption from payment of tax on imported machinery and equipment, and a deduction in tax payments for half of the company’s personnel training.
Some of the models that were produced or assembled in the Sta. Rosa plant during this period include: the Ford Lynx, the sedan and hatchback that was based on the Ford Focus platform; the Ford Ranger pickup, one of the brand’s bestselling models; the Ford Escape compact SUV; the Ford Focus; and, for a time, the Ford Everest.
In June 2012, Ford Philippines sent shockwaves throughout the business and automotive communities in the country when it announced that it was, once again, shutting down its production facility in the country. A total of 250 jobs were affected by the closure.
According to Ford officials at the time, it was a decision that they did not make easily after a “comprehensive assessment of opportunities to bring a new product program to the Philippines.”
The biggest issue, Ford Motor Co. ASEAN president Peter Fleet said, was the size of the local supply base, which wasn’t yet on a scale that makes new investment decisions very straightforward.
“It’s a different question when you bring in a whole new platform into the plant, getting new supplies, with new components. So that’s the biggest issue—the lack of a broad supply base in the Philippines.”
The second issue was of economies of scale. By global car manufacturing standards, the facility in the Philippines was minuscule, with only about 250 employees churning out about 35,000 vehicles a year.
“If you look around the world, the way Ford Motor Co. tends to operate is that we really like to manufacture in scale with full integrated manufacturing facilities, which typically would be at a scale of 300,000 units plus, in terms of assembly capacity in any one plant,” Fleet said. “The plants being built today in China, India and Thailand, all of those plants have the potential of that kind of capacity should we choose to do that. Clearly that’s not practical today in the Philippines.”
Essentially, from a business standpoint, it was more practical for Ford to expand an existing production facility that already had large-enough production capabilities rather than keep one that was still relatively smaller scale. Plus, parts were also easier to obtain from suppliers nearer those other facilities than here in the Philippines.
This was what happened in the Philippines. About a month before Ford made the announcement to close the Sta. Rosa plant, it was celebrating the opening of a brand-new facility in Rayong, Thailand for which it invested $450 million and that was expected to produce as many as 150,000 units annually.
Despite the shutdown of Ford’s local assembly operations, the American carmaker remains a popular brand whose models are embraced by many Filipinos. And there’s no doubt that it will continue to remain a favorite in the years ahead.